Since you can do most of your travel from Day 1 - 7, it makes sense to buy a 7 day JR Pass. However you make such good savings with the JR Pass and even a 14 day JR Pass would pay off for this itinerary.

To travel to Nikko, have a look here. As there are different budget options for getting there.

Very nice itinerary btw, when reading it I showhow got the feeling of getting on the train myself to make the trip.